More people learning joys, challenges of working in a family business

February 17, 1984

By Debra Ann HattenStaff writer of The Christian Science Monitor

Boston

Thinking of going into business with your spouse or kids? A business can be a ''terrific support and cohesive element for a family,'' says Bruce Fleischer, second-generation manager and owner of his own family's business, Kankakee Industrial Supply Company, which wholesales industrial paper products. Working together provides an opportunity to spend time together as a family. There are also certain financial advantages to building a family business.

A business employing only immediate family members is not required to withhold taxes, says Charley Gerrior, a financial planner at the Cambridge Group , a financial planning firm in Cambridge, Mass. This eliminates some onerous paper work.

Family members may also be more willing to take a portion of the business and a small salary in the beginning instead of higher salaries, says Suzanne Du Molin, senior financial consultant at Bailard, Biehl, &amp; Kaiser, a financial planning firm in San Mateo, Calif.

What kind of family could consider going into business together? The most important factor is ''how healthy the family is,'' says John Ward, professor of management at Loyola University in Chicago. He researches family businesses successful into the second and third generations.

The family that has fun together - sails, goes off to the farm or family place, plays hard, and has shared responsibility - is more likely to succeed, he adds.

The two separate areas of expertise of two-career couples could be combined into one successful business. A computer programmer and an engineer, for example, could form a company to produce and market engineering programs.

As in any small business, one of the partners must bring quality management and marketing skills to the company, says Howard Gordon, senior trust officer at State Street Bank in Boston. As the company progresses, other skills become more important.

''My father had the marketing skills'' needed to launch the company, ''and I have the administrative skills that are needed now,'' says Mr. Fleischer.

This is a decade of people wanting to go into business for themselves, says Mr. Ward, and one in which family ties are once again cherished. Perhaps this coincidence has generated the renewed interest in family companies he has noted lately. Several banks and accounting firms have begun giving seminars for the family business in recent years, he adds.

Working with the family, Mr. Ward notes, parents have a unique opportunity to teach children principles of saving, sacrifice, and investment - values which can be applied rewardingly to other facets of the children's lives.

Many of the younger generation are enthusiastic about having their own business someday, and consider a family business a tremendous opportunity to get to know their family well - especially daughters of fathers absorbed in the business, says Mr. Ward. Daughters typically have much more to communicate, more in common with their fathers as they share experiences. Some children stay with the business because it is a family tradiition - a way to put down roots.

Mr. Fleischer, secretary of the National Family Business Council, and a director of the Chicago Family Business Council, both in Chicago, stresses that ''discussion is very important'' - on succession within the company, parents' goals for the business, and business decisions made by other family members.

When his parents started to talk about retiring several years ago, Mr. Fleischer's parents, his brother, and his sister sat down with planners from the National Family Business Council. Each business responsibility held by his father or mother was assigned to a son or daughter, or to an outsider hired for that purpose. The parents stayed on three years, training and directing a smooth transition.

Mr. Ward says he and others encourage the older generation to let the children take the reins. Most businesses change management every five to ten years, he continues. A business needs fresh ideas; the next generation of leadership needs room to exercise its ideas.

When there is more than one son or daughter inheriting from the parents, there may be confusion about who runs the company. The Fleischers worked out a good solution to this problem: Mr. Fleischer's brother spun off a new company to handle the office furnishings part of the business.

The family business is not for every family, nor for every family member. Some children don't like working for their parents; some need independence from the family, says Mr. Ward. Family feuds may result in dissolving the business or selling out, adds Mr. Fleischer.

''Family businesses are regularly threatened by estate taxes that cause the owner to consider liquidation,'' continues Mr. Fleischer. Although the 1982 Tax Equity and Fiscal Responsibility Act of 1982 allows a gradual increase in the estate-tax exemption, culminating in a $600,000 limit in 1987, he would like to see further improvement in estate tax relief.

He would also prefer to see improved capital availability for new small businesses, which create 80 percent of the new jobs in the economy. He supports legislation in the works that may allow a tax deduction to individuals who invest in small businesses of their choice.